Italy Flouts Rules and Sets Itself on EU Collision Course

(Bloomberg) -- One of the main principles of the European Union’s fiscal rules is that the structural budget deficit may not surpass a medium-term objective of 0.5 percent of GDP if the debt-to-GDP ratio is above 60 percent or 1 percent if that ratio is below 60 percent. Old forecasts had Italy adhering to that commitment by next year, but the new government is openly flouting the rules and setting itself on a collision course with the EU. While Bloomberg Economics believes that a compromise will probably be found, the disagreement marginally increases the probability of the populist government leading the country out of the euro area.

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